Risk Management Instruments, Strategies and Impacts in the Complex Organizations

American Journal of Industrial and Business Management, 2019, 9, 1157-1167 http://www.scirp.org/journal/ajibm ISSN Online: 2164-5175 ISSN Print: 2164-5167 Risk Management Instruments, Strategies and Impacts in the Complex Organizations Federico De Andreis, Marco Florio Università degli Studi Giustino Fortunato, Benevento, Italy How to cite this paper: De Andreis, F. and Abstract Florio, M. (2019) Risk Management In- struments, Strategies and Impacts in the Even they don’t realize it; all types of organizations are probably employing Complex Organizations. American Journal some kind of risk management. Over time, procedures are developed to make of Industrial and Business Management, 9, sure that things don’t go wrong and plans are putting in place to reduce orga- 1157-1167. https://doi.org/10.4236/ajibm.2019.95078 nizational impact if they do. This article examines the relevance, in the complex organizations, of risk management. After having defined the risk, Received: April 20, 2019 through the use of case studies, this research will seek to define the instru- Accepted: May 17, 2019 Published: May 20, 2019 ments of risk analysis in complex organizations, showing the reason why the risk management should be considered as a priority, regardless of the magni- Copyright © 2019 by author(s) and tude of the negative outcomes. Scientific Research Publishing Inc. This work is licensed under the Creative Commons Attribution International Keywords License (CC BY 4.0). Risk, Risk Analysis, Risk Management, Risk Assessment, Organization http://creativecommons.org/licenses/by/4.0/ Open Access 1. Introduction On the night of 1 July 2002, a Bashkirian Airlines Tupolev Tu 154 and a DHL Boeing 757 cargo jet collided in the skies over Überlingen, a southern German town on Lake Constance, along the border between Switzerland and Germany. Both aircraft crashed to the ground, causing a fatal accident for all occupants (69 passengers and crew aboard the Tupolev and 2 crew members of the Boeing). That catastrophe will be remembered in later years as the Überlingen air disaster. About a year after, another disaster occurred on 8 October 2001 at Linate Airport in Milan, Italy, when a Scandinavian Airlines McDonnell Douglas MD-87, carrying 110 people bound for Copenhagen, Denmark, collided on take-off with a Cessna Citation CJ2 business jet, carrying four people bound for Paris, France, which had entered the runway without permission from an intermediate tax- DOI: 10.4236/ajibm.2019.95078 May 20, 2019 1157 American Journal of Industrial and Business Management F. De Andreis, M. Florio iway. All 114 people on both aircraft were killed, as well as four people on the ground. It remains the deadliest accident in Italian aviation history. Investigation re- vealed the collision was caused by a number of nonfunctioning and noncon- forming safety systems, standards, and procedures at the airport. Both accidents, were considered as two of the most serious organizational accidents in aviation and as two of the major aeronautics failures of safety. They were caused, in fact, by a concatenation of operational and latent errors, showing the precarious state of aviation safety in Europe in those years, concerning, par- ticularly, some unsafe procedures and practices tolerated for years that have made these events, apparently usual, two of the most catastrophic accidents in aviation, with several tens of victims. This paper aims to understand, with the contribution of these two case studies, the multitude of factors causing errors and negative outcomes, in order to clarify how the risk could be reduced in a complex organization, like the aviation. The goal of the article is to demonstrate the importance of risk management in the organizations. Risks, in fact, could be viewed in two ways: the person approach and the system approach. Each has its model of error causation and each model gives rise to quite different philosophies of error management. Understanding these differences has important practical implications for coping with the ever present risk of mishaps in organizational practice. The article is organized as follows. Section 2 analyzes the risk, its definition and its meanings because understanding the components of a risk will allow an organization to manage risk effectively. Therefore, in this section, also a distinc- tion between objective and subjective risks is made. Section 3 introduces the role of the human factor and decision making as the most critical aspects in the complex organizations. Section 4 then combines aviation safety, as well as the risk prevention in complex organizations, with significant number of studies which refer to the risk analysis and the human factors. Sections 5 and 6 describe in depth the two case studies as described above, the incidents of Überlingen and Linate, understanding the dynamics, causes and systemic flaws that have led to such disasters. Finally, Section 7 presents our conclusion, explaining the link between the dynamics that can lead to critical events and the human reality and, in each system or organization. Therefore, in this section, we will investigate also the role of risk managements, with its instruments and strategies, as a priority in all organizations to reduce the probability of an adverse event and to mitigate the consequences of any potential risk. 2. What Is Risk? Definition and Meanings The term risk defines the potential chosen action or activity, including the choice of not acting, that can lead to a loss or to an unwanted event, namely the possibility of undergoing damage, associated to a condition more or less pre- DOI: 10.4236/ajibm.2019.95078 1158 American Journal of Industrial and Business Management F. De Andreis, M. Florio dictable [1]. We can state that the organization’s purpose is to create value by interacting with its environment (customers, suppliers, technology, competition, markets, govern- ment, etc.); value is created by providing goods and services that fulfill the needs of the organization’s customers or constituents. Furthermore, we can also affirm that risk is the property that causes value to vary in uncertain ways. The source of risk is changing in the environment, since the environment represents a complex set of relationships and interactions among organizations and other elements. The complexity and fluidity of the interactions creates uncertainty: no one organization has the ability to either completely control, influence or foresee all possible changes in the environment but the risk management, therefore represents a fundamental issue for all the complex organizations. Thus, companies increa- singly focus more on identifying risks and managing them before they even affect the business. The ability to manage risk will help companies act more confidently on future business decisions, in fact, their knowledge of the risks they are facing will give them various options on how to deal with potential problems; therefore an important role, in the risk prevention, is given to the risk analysis. Thus, we can state that risk is the consequence of a specific incident, specified by their severity level and by the probability of occurrence. Determining these two factors is not easy and it is often affected by subjectivity of the analyst. In aviation, the document ICAO-Doc 9859 (Table 1) defines the extent of damage that could reasonably occur as a consequence or a result of detected risk; Table 1 presents in 5 levels of severity, from highest to lowest, (catastrophic, major, moderate, minor and insignificant) customized according to the system or to the events taken into account. Therefore, in the ICAO Documents also definitions for each category of severity are given. The probability of occurrence is the most difficult to determine, because the events are not only of a technical nature, such as the failure of a switch, for which there are analytical methods for the estimation of reliability, but often the events are related to the behavior of the operators. Table 1. Levels of severity, ICAO-Doc 9859. LEVEL DESCRIPTOR SEVERITY DESCRIPTION* 1 Insignificant No significance to aircraft related operational safety. 2 Minor Degrade or affect normal aircraft operational procedures or performances. 3 Moderate Partial loss of significant/major aircraft system or result in abnormal F/Ops procedure application. 4 Major Complete failure of significant/major aircraft system or result in emergency F/Ops procedure application. 5 Catastrophic Loss of aircraft or lives. *Customize according to the nature of product or service provider’s operations. DOI: 10.4236/ajibm.2019.95078 1159 American Journal of Industrial and Business Management F. De Andreis, M. Florio In order to determinate this possibility, the opinion of experts in the industry is used, but also various methodologies, to assess the human behavior in an incident, have been developed, and therefore the probability of the occurrence of his actions. Thus, in order to assess the risk probability, this could sometimes be replaced by the frequency of occurrence (Table 2); the first, in fact, being a probability is represented by a number between 0 and 1, while the second is expressed in terms of number of occurrences in a certain time interval (for example once a month, three times a year). Table 2 represents a matrix of risk probability and risk severity. Also the risk probability is listed into 5 levels (frequent, occasional, remote, improbable, and extremely improbable). The combination of frequency (probability) and severity leads to the definition of the risk matrix: depending on where the risk of the event is placed, this may be acceptable (1A, 1B, 1C, 1D, 1E, 2D, 2E, 3E), or may require interven- tion (2A, 2B, 2C, 3B, 3C, 3D, 4C, 4D, 4E, 5D, 5E) or may be unacceptable (3A, 4A, 4B, 5A, 5B, 5C). In order to defined the risk matrix, the tolerance can be used; this curve in fact defines the area within the risk is tolerable and the area within the risk is no longer acceptable.

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